Santiago-Sociedad Quimica y Minera de Chile S.A. (SQM) reported net income of $190.6 million ($.72 per ADR) on sales of $589.1 million for the third quarter ending Sept. 30, 2008, up from the year-ago $41.5 million ($.16 per ADR) and $322.5 million. “We are pleased to announce that SQM has once again achieved record earnings, with net income for the third quarter alone exceeding not only net income for the first six months of this year, but also net income for the full-year 2007,” said Patricio Contesse, SQM CEO. “These results are due in large part to higher prices for our potassium-based fertilizers.” The company also reported improved results from its iodine and lithium segments. “While current world economic conditions have generated uncertainty about the coming months, we are confident in the fundamentals underlying our key markets, where we expect to see growing demand and tight supply conditions.” Third-quarter specialty fertilizer revenues were $341.1 million versus the year-ago $162 million. Nine-month fert revenues were $787.5 million, up from the year-ago $437.1 million. SQM expects 2008 specialty fert sales to be below 2007’s because last year’s sales exceeded production levels. For now, SQM says some customers may opt to delay some of their fertilizer purchases, because farmers have been affected by the tight credit conditions generated by uncertainty in the financial markets. SQM believes any delays should be temporary, since demand for these specialty products remains robust. The company notes that a significant number of these farmers need to achieve export quality standards for fruit and vegetables, and they will use modern agricultural techniques to produce high crop yields. Company-wide, SQM reported nine-month net income of $381.1 million ($1.45 per ADR) on sales of $1.38 billion, versus the year-ago $135.4 million ($.51 per ADR) and $881.3 million. In other news, SQM has announced an interim dividend of $.37994 per share, with amounts of $100 million. The dividend will be charged to net income ending Sept. 30, 2008. The dividend will be paid Nov. 21, 2008, to those registered shareholders during the fifth working day prior to the payment date. SQM’s board of directors has also agreed that the business year 2009 will include an interim dividend. It is to be paid in November 2009, and will not exceed 30 percent of the net profits earned by the company during the first nine months.
U.S. Gulf/Tampa: Nothing new was reported in the market last week. The $575/mt DEL Tampa is expected to stand for the whole month of November. In the meantime, sources say NOLA may soon fall, but there was no word on concrete business last week.
Trinidad: Major players are taking down plants in the country for turnarounds. PCS Nitrogen took down its No. 2 plant the week of Oct. 27 for a one-month turnaround. Once it is back up, the company expects to take down the No. 1 plant for maintenance as well.
Yara is moving a planned 30-day turnaround of its Tringen II plant to Nov. 7.
Sources report that the Nitro plant is in the midst of a 10-day turnaround and is expected to come back up at 75 percent of capacity. The CNC plant was reportedly going to go down for 15 days, also to come back up at 75 percent capacity.
Eastern Cornbelt: The anhydrous ammonia cash market remained at $950-$1,000/st FOB regional terminals, with no new business to test the market.
Western Cornbelt: Several dealers said they anticipate a decent fall run on ammonia if weather conditions hold, and some field movement was reported in the region last week. The ammonia market was tagged in the $875-$950/st FOB range for prompt tons, with one Iowa source reporting the common dealer market last week at the $900/st FOB level.
Northern Plains: North Dakota sources continued to quote the anhydrous ammonia market at $1,200/st DEL, and one dealer said he’d like to have the entire month of November to catch up on delayed fall ammonia applications in his location. Minnesota sources pegged the spot ammonia market at $950-$1,050/st FOB, with no confirmed programs for spring prepay.
Great Lakes: Pricing ideas for anhydrous ammonia varied widely in the region. Some southern Wisconsin sources pegged the market for prompt or spring prepay tons in the $975-$1,000/st FOB range on the low end, while Michigan dealers talked of prompt ammonia being offered in the $1,060-$1,100/st FOB range,with spring prepay as high as $1,150/st FOB.
Black Sea: Prices remain soft,with reports that deals closer to $400/mt FOB are in the works. Some who speak of the market firmly in the low $400s/mt FOB are unable to point to specific business to back up their claims. However, the industry is rife with talk of ever-lower prices. Rumors of sub-$300/mt FOB were being reported at press time, with sources exclaiming that such would likely be getting below production costs.
Once Yara and Mosaic settled a couple of weeks ago and the price dropped to the upper $400s/mt FOB, industry observers have been waiting for the price to keep falling.
UREA
U.S. Gulf: The uptick in NOLA urea prices has stalled, according to most sources last week. There were reports of $327.50; however, sources said that was for tons positioned upriver, and not for NOLA proper. Sources said the best that could be done at NOLA was $320/st FOB, and others said that number did not last long. By late in the week, sources said $305-$306/st FOB was more the market, with trades reported in that range.
Eastern Cornbelt: Granular urea was pegged at $385-$425/st FOB regional terminals to the dealer.
Western Cornbelt: Granular urea was pegged in the $385-$425/st FOB range, with more quoting the upper end of that range as the week progressed.
Northern Plains: The granular urea market was reported at $400/st FOB the Twin Cities at midweek. Delivered urea in North Dakota covered a wide range, from $425/st rail-DEL on the low end up to $440-$480/st on the upper end, depending on location and supplier.
Great Lakes: Granular urea was pegged at $425-$450/st FOB regional terminals, with the low reported by several sources in southern Wisconsin. That range was down dramatically from last report. In fact, that range was precisely half of what the dealer price was in the region back in mid-September.
Northeast: Prices were dropping, but a lack of activity kept many markets untested last week. “If anyone in my organization buys a kernel or a gallon, I’ll shoot ‘em,” said one source.
The granular urea market had reportedly dropped to $412-$450/st FOB Philadelphia, Pa., and Baltimore, Md., with the upper end reflecting postings but the lower number a truer reflection of the real dealer price last week. One source also reported prilled urea being offered at the $412/st level FOB Philadelphia.
India: STC pushed back the deadline for their tender to Monday, Nov. 3. The tender was for an unspecified amount of urea to be delivered throughout the month of December.
Asian sources said the new deadline – offers were originally due Oct. 31 – and later delivery dates were designed to accommodate problems that might occur in the ports during the last two months of the year.
The monsoons tend to cause vessel unloading to get backed up. In previous years there were reports of vessels sitting at anchor for more than a week waiting to unload because of the delays. Area sources say stretching out the delivery time from just the first part of December to the whole month will allow deliveries to be better handled.
Just who will participate in the tender is a matter of contention.
Some in Asia say the Middle East producers will have to participate because they want to avoid building up large reserves of urea in their warehouses.
Others say the Middle East producers will not participate because the price will have to come down at least another $50/mt to be competitive.
Traders are reportedly nervous about making offers because of the way IPL walked away from orders issued back in July and August. If the price drops further following the tender, sources fear STC could repeat the IPL action.
The one thing that is clear, said one trader, is that trading houses and urea producers will have to participate, because India is the main game in town. To protect themselves from any potential walk away, sources say the individual offers will not be as large as in previous tenders. For example, instead of offering 100,000 mt in a firm offer, a company may offer three lots of 30,000 mt or a couple of panamax cargoes with some added as options.
The bottom line is that India still needs at least 350,000 mt for this season. With prices in a freefall, sources are watching to see how many tons STC will take and if it leads to a new tender from MMTC or IPL.
Reportedly, STC agents have been talking to traders and producers in an effort to get the delivered price in the low $300s/mt CFR.
Besides lower prices of urea, sources say the freight market is also crashing.
Area players note that the freight rate from the Arab Gulf to the west coast of India is now as low as $10/mt. One trader noted that this rate does not fully pay the cost of running the ship, but nothing is on the horizon to move the price up.
With low freight and a global softening of the urea market, sources say the Middle East producers may be able to sell in the low $300s/mt CFR and not have to go below $300/mt FOB themselves.
Middle East: The sales to IPL at $345-$347/mt FOB remain the last done business out of the area. By the end of the first week of November, however, sources expect to see the price come off at least $40/mt.
Asian traders are of different minds when it comes to producer participation in the upcoming STC tender.
Some argue that the producers will stay away from the tender. They say cutbacks in production and maintenance shutdowns will prevent the build-up of reserves that could force prices down in the future.
Others say that shutdowns and reductions in output will not be enough to prevent reserves building up.
The big issue is how low the producers will have to go to be competitive in the STC tender.
The current collapse of the freight market is helping the producers keep from going sub-$300/mt FOB, say sources.
If the Indian buyers are willing to accept $310-$320/mt CFR to a western port, sources say the current $10/mt freight market will allow the producers to offer at $300-$310/mt FOB.
Black Sea: Sources now report that $280/mt FOB was done, and $270/mt FOB is the next step. The $280/mt FOB is reportedly a small spot prompt cargo.
The rest of the area is loading the cargoes to fulfill the IPL tender awards.
Sources point out that IPL wanted delivery by the last week of November. With a steaming time of approximately 22 days, the ships have to be loaded this week to make the deadline.
Once the IPL tons are sent out, sources say the only other large bit of business on the horizon is the STC/India tender that closes Nov. 3. Industry observers expect the initial offers to reflect a softer market price.
With the Indians asking for prices in the low-$300s/mt CFR and freight rates from Yuzhnyy to the west coast of India pegged at $32-$33/mt FOB, the reports of $275/mt FOB material would be about right, said one source.
Because of the whacking some traders got by IPL when they walked away from higher-priced awards, sources say few offers will involve large lots. Rather, the offers will come in several lots, with only one or two cargoes set as firm. The remaining tons will be offered as optional cargoes.
China: Sources are waiting to see what will happen with the export duty come Jan. 1, 2009. With the global urea market so soft, Asian sources speculate that by the end of November or mid-December Beijing will announce changes in the export duty.
Originally, the industry expected to hear that the duty would be increased from its current 175 percent back up to 185 percent. But with the global market so soft, some in the industry now speculate that the extra duty – the 150 percent portion – may be dropped. That would leave the export duty for the first quarter at 35 percent.
Another suggested move is that the extra duty will be halved.
One trader noted that whatever Beijing does will be dependent on what happens to the global urea price. The whole purpose of the export duty, he said, was to prevent urea from leaving China.
NITROGEN SOLUTIONS
U.S. Gulf: While urea prices may be a little shaky, sources said last week that at least product was moving. Such could not be said for UAN. It was hard to find anyone even talking barge prices, much less buying.
Eastern Cornbelt: The UAN market was generally quoted in the $13.25-$13.65/unit range FOB regional terminals to the dealer, with some suppliers referencing UAN-32 as high as $470/st ($14.69/unit) FOB.
Western Cornbelt: UAN was generally quoted in the $13.25-$14.00/unit FOB range in the region last week, with the low end out of most river terminals to the dealer. As one supplier said, however, “There is no interest and no one is passing on any business if it’s lower than that.”
Northern Plains: The UAN market was pegged at $13.75-$14.69/unit FOB regional terminals to the dealer, with no new sales reported. The upper level reflected reference pricing for UAN-32 ($470/st) to the dealer out of spot Minnesota terminals last week.
Great Lakes: The UAN market was reported at $13.65-$14.69/unit FOB terminals, with the low reported in southern Wisconsin and the upper end reflecting dealer reference pricing from some regional suppliers.
Northeast: The UAN market was quoted at $15.00-$15.35/unit FOB Baltimore and Philadelphia, with the low also confirmed FOB shipping points in Delaware. Sources reported no business at those numbers, and some speculated that lower numbers could be had by serious buyers. As for UAN-32 terminal pricing in upstate New York, the dealer price remained at the $16.50/unit FOB level with no sales to test the market.
AMMONIUM NITRATE
U.S. Gulf: Like UAN, ammonium nitrate barges were called quiet. Prices were called $480-$500/st FOB.
Western Cornbelt: Ammonium nitrate remained at $525/st FOB regional terminals to the dealer.
AMMONIUM SULFATE
Eastern Cornbelt: The granular ammonium sulfate market remained at $200/st FOB or DEL in the region following Honeywell’s Oct. 20 price change.
Western Cornbelt: Granular ammonium sulfate was quoted at $200-$225/st FOB, with the low reflecting Honeywell’s list price and the upper end reported in Iowa on a spot basis to the dealer.
Southern Plains: American Plant Food Corp. reposted its ammonium sulfate prices. Effective Oct. 30, APF’s granular postings in Texas dropped to $250/st FOB Freeport, $265/st FOB Galena Park, $280/st FOB Fort Worth, and $300/st FOB Littlefield. APF’s course grade postings moved on that date to $235/st FOB Freeport, $250/st FOB Galena Park, $265/st FOB Fort Worth, and $285/st FOB Littlefield, while standard grade postings dropped to $225/st FOB Freeport and $275/st FOB Littlefield. APF’s N-Pac Compacted posting moved on Oct. 30 to $270/st FOB Galena Park.
Northern Plains: Granular ammonium sulfate was reported at $200-$230/st DEL in the region, depending on location and supplier, with the upper end reported in North Dakota. Honeywell’s Oct. 20 reference prices FOB Roseport, Minn., included granular ammonium sulfate at $200/st and mid-grade at $180/st. The company was also referencing rail-delivered product in Minnesota at those same levels for both products.
Great Lakes: Ammonium sulfate pricing had dropped considerably following updated postings from Honeywell. Wisconsin dealers pegged the market at $200/st FOB or DEL for granular product, with mid-grade at $180/st. Effective Oct. 20, Honeywell reposted granular ammonium sulfate at $200/st FOB Amherst Junction, Wisc., and $200/st DEL in Wisconsin, with mid-grade referenced at $180/st DEL in Wisconsin.
Northeast: Ammonium sulfate pricing was down dramatically from last report following a recent downward pricing adjustment from Honeywell. Sources tagged the market at $205-$227/st FOB, with the upper end FOB Philadelphia to the dealer.
Southeast: Sources quoted reference pricing at $335/st railDEL for granular sulfate and $285/st rail-DEL for standard in Florida, Alabama, and Georgia.
PHOSPHATES
Central Florida: The waiting game continued last week for the Central Florida phosphate market. Producers were waiting for traders to order, traders were waiting for dealers, and dealers were waiting for farmers, some of whom were waiting to harvest their crops. The U.S. Department of Agriculture recommended farmers wait to buy fertilizer because prices will go down, and bankers were making the same recommendation. The tipping point will be when prices find a bottom and product begins to flow. The problem is, no one knew what that price was or when it would happen. The earliest guess was mid-November, but it could be as late as early February. Regardless, farmers will have to buy fertilizers for their spring crops in order to produce enough to make a profit.
Mosaic continued its curtailment of production, but inventories continued to build. Meanwhile, the cost of raw materials – especially sulfur – dropped sharply from around $615/lt to $150/lt under the terms of contracts for the fourth quarter, which were all settled very, very late last week. That will make it much easier for phosphate producers to make a profit even with lower prices for their own products.
Last Tuesday CF raised its Central Florida price to $810/st FOB, but dropped it back to the previous $765/st FOB on Thursday. The Central Florida DAP price range last week remained $765/st. Mosaic has no posted price for Central Florida. PCS Sales’s Central Florida reference price was unchanged at $1,070/st FOB for DAP. Last week, Agrifos was seeking $755/st FOB for trucks and $750/st FOB for rail shipments.
Eastern Cornbelt: Sources continued to report falling phosphate prices. “Unfortunately as you chart this process, what we know from history but are reminded of everyday is that this thing was a hill that became a mountain on the way up, but it’s closer to a cliff on the way down,” said one source in reference to phosphate pricing. “The good news,” he added, “is that harvest is progressing and we’ve had more inquires this week than last.”
The DAP market was quoted at $825-$860/st FOB regional warehouses to the dealer, with the low out of river locations and the upper numbers inland. MAP was $25/st higher than DAP at most locations. One source also reported TSP at roughly $35/st under DAP at spot Ohio locations, or $815-$835/st FOB.
10-34-0 continued to be quoted at $1,150-$1,200/st FOB in the region. Effective Nov. 1, Agrium’s posted prices for super-phosphoric acid and merchant grade acid will drop to $1,750/st rail-DEL in the continental U.S., down from October pricing levels at the $2,500/st rail-DEL level for both products. Agrium’s reference levels for December include both SPA and MGA at $1,800/st rail-DEL, with January pricing moving to $1,850/st rail-DEL.
Western Cornbelt: The DAP market was quoted at $825-$875/st FOB regional warehouses to the dealer, with the low reported out of spot river locations. MAP was $25/st higher than DAP. 10-34-0 remained at $1,150-$1,200/st FOB in the region.
Northern Plains: The DAP market had reportedly slipped to $850-$870/st FOB the Twin Cities to the dealer, with MAP at a $25/st premium to DAP. North Dakota sources continued to report delivered MAP as high as $950-$1,000/st from western shipping points, but there was little new business to test that market. 10-34-0 was pegged at $1,200-$1,250/st FOB or DEL in the region, also down considerably from last report.
Great Lakes: Phosphate pricing was down significantly from last report, but new sales were few. “The short story is that this fall harvest/application season is well delayed from normal, and because so many prepositioned product, their focus now is on moving the stuff they’ve already positioned,” said one. “There’s lots of talk about prices, but literally it’s all talk and not much doing.”
The dealer market for DAP was reported at $895-$925/st FOB in the region, with the low quoted by Wisconsin sources and the Michigan dealer market reported in the $910-$925/st FOB range. Several said that market was transitioning to still lower numbers in the near term, with some eyeing $840-$850/st FOB inland for the next round of quotes.
MAP was $15-$25/st higher than DAP, and TSP was reportedly trading at a $35/st discount to DAP, where available. The 10-34-0 market in the region was reported in the $1,200-$1,300/st FOB range, depending on location and time of delivery.
Northeast: DAP was also down significantly from last report. Sources pegged the market at $886-$900/st FOB warehouses to the dealer, with the low FOB E. Liverpool, Ohio. One regional source also quoted truck-DEL DAP out of North Carolina at the $855/st level last week.
MAP was roughly $25/st higher than DAP. The 10-34-0 market remained at $1,100/st FOB in the region.
U.S. Gulf: No one believed the market was going to go up in the near future, and the price could fall below $600/st FOB before anything starts to happen. However, even then, the need has to exist – and it did not last week. In the Cornbelt, harvesting was just starting or was about to start last week. Before farmers can start putting down more phosphate, the crops must be harvested and the ground prepared. That doesn’t necessarily mean they will head to their local dealers for products, and they could wait until as late as February before they do. In the Great Depression, the problem was no one had any money, but in this economy farmers have money – they just don’t want to spend it.
Corn began to rise, along with beans, wheat, and everything else early last week, but retreated late in the week to just over $4/bushel.
Last week, not only was there an absence of sales, there were virtually no real offers, but there was lots of product. Production was ongoing but at a reduced pace, at least for Mosaic, which continued its curtailment program.
The NOLA DAP barge range last week was $700-$720/st FOB, unchanged from the previous week. Mosaic had no posted price.
U.S. Export: The credit market, or the lack of a credit market, was having an impact on phosphate exports last week. Apparently Pakistan and Ethiopia planned to issue tenders for phosphate, but were unable to produce letters of credit to make payment, so the plans were cancelled. Not a good sign in an already weak market.
Phosphate producers around the world were curtailing phosphate production due to the lack of a market; however, declining prices did not motivate buyers. Brazil and South America could begin to buy in December
With no new sales, the export DAP price range remained at $1,013-$1,015/mt FOB, which was probably overly optimistic but based on the most recent sales.
China: Beijing is expected to make changes to the export duty on phosphates soon. Sources report that the domestic producers are under severe economic strain. They bought rock and sulfur when the market was at its peak. The restriction of offshore sales created a glut on the domestic market and forced prices down.
The producers are now hard-pressed to make ends meet. Sources say they desperately need to sell their product to other countries, even in a softening market.
One trader speculated that Beijing could announce the removal of the special export duty of 150 percent on phosphates as early as mid-November.
POTASH
Eastern Cornbelt: The potash market remained at $875-$900/st FOB in the region.
Western Cornbelt: Potash was steady at $850-$900/st FOB in the region, depending on grade and location.
Northern Plains: Potash was reported in the $875-$900/st DEL range in the region last week. Some sources talked of reports of $850-$860/st DEL sales taking place, but business at those numbers was not confirmed. Reference pricing FOB Saskatchewan mines remained at $767/st FOB for standard, $780/st FOB for soluble, $772/st FOB for granular, and $780/st FOB for white granular.
Great Lakes: Wisconsin sources pegged the potash market in the $860-$915/st DEL range last week, with FOB warehouse numbers quoted in the $875-$925/st in the region.
Northeast: The potash market was quoted at $867-$900/st FOB, with the low reported for red granular potash FOB E. Liverpool to the dealer. The upper end of the range was also quoted for delivered potash tons to some locations of the region.
Russia: Urakali (Berezniki, Perm Territory) said Oct. 30 that it will curtail Q4 production of potassium chloride by 500,000 mt in 2008. The company’s revised total output for the year is 4.9 million mt. The company says the turmoil in the global financial markets has impacted all areas of the commodities sector, including agriculture. The wave of reactionary selling of liquid assets, fueled by the downbeat mood in the stock and commodity markets and the liquidity crisis, has triggered sharp decreases in crop prices that do not reflect the industry’s robust fundamentals, underpinned by growing population, less arable lands, and the urgent need to fill crop inventories that are now at historically low levels by the last 10 years.
“Amid the current plunge in actual demand, we have taken the prudent decision to reduce our production to a more appropriate level,” said Vladislav Baumgertner, Uralkali CEO. “Liquidity crisis is hindering the farmers’ ability to purchase and use fertilizers. However, we are confident that the situation is a result of temporary finance problems and has nothing to do with the industry’s fundamentals that still remain utterly solid. We strongly believe in the long-term strength of the potash industry and anticipate its resurgence once the market settles down.”
Uralkali said the planned reduction in production offers it a good opportunity to repair and modernize its facilities that for the last several years have been used at their full capacity.
In other news last week, Uralkali said that in early 2010 it plans to launch a second production line, with capacity of 1.5 million mt, at the Fourth Mine Division Chemical Plant. This should take total capacity to 7 million mt/y. In line with proposed plans, investment into production development will be US $170/mt of additional capacity, inclusive of the capacities launched in 2006-2008. Following the launch of the second line, the first line, which has been used continuously since 1992, will cease operations for one year for capital repair. The value of the planned investment into the line’s repair and modernization is 1.5 billion roubles. This production downtime will be used to substitute the old skip hoists at the Second and Fourth Mine Divisions, which have been used for 40 and 22 years, respectively. A total of 2 billion roubles will be invested into the project, which is expected to boost the capacity of the mine elevators by 1.5 times.
SULFUR
Tampa: Mosaic finally got around to settling all of their sulfur contracts for the fourth quarter. As a result, the Tampa sulfur range changed this week to a flat $150/lt, and other related markets will move accordingly. The range will not include the single contract PotashCorp agreed to at $300/lt below the previous price, because it was not reflective of the current market.
While the new price was drastically lower than the previous quarter, some were wondering if it wasn’t too high, considering the world market. The next quarter will probably see a decline of between $50/lt and $100/lt, and possibly more. After rising to historical highs, sulfur may soon hit historical lows on the world market and in the U.S.
Meanwhile, refineries on the Gulf Coast were cranking out fuel and the byproduct sulfur at a high rate, but markets evaporated and inventories were rising faster than the national debt. Blocking could begin at Galveston sometime soon, and other locations may soon follow. Prillers were also operating, but had no place to send the finished product.
Transportation was not a problem last week, which wasn’t surprising since nothing was moving.
West Coast: Sulfur producers and priller operators on the West Coast were beginning fourth quarter negotiations last week, and prices will take a major drop. California’s sulfur is part of the world market, unlike Tampa and the Gulf, and refineries must make it profitable for prill operators to make some kind of profit, in order to get rid of their waste material. Pricing could even be negative in some cases.
Vancouver: Last week China had not signed new agreements with Canadian suppliers, but most think it will do so before the end of the year – maybe. Space for additional supplies of sulfur at Vancouver remained severely limited last week, and blocking was resuming in Alberta.
MARKET NOTES
India: Planning Commission member Abhijit Sen recently sounded more optimistic than the Prime Minister’s Economic Advisory Council (PMEAC) with his projection that agriculture growth would not be less than three percent this year. The Council has projected only a two percent growth in the sector for the current year.
“Considering the first advance agriculture estimates of the current year along with the final estimates of last year, agriculture growth this year should not be less than three percent,” Sen said, after releasing a report on food prices compiled by international agency Oxfam India. Earlier in August, PMEAC had projected the agriculture production to grow at a lower pace of two percent in the current year against 4.5 percent in 2007-08. The reasons for the slackening projections were a higher base and an uneven spread of the southwest monsoon in July. Noting food production, Sen said as per the first estimates, rice and soybean output is expected to be more, with other cereals lower than last year.
“Overall, agriculture growth during the 11th Plan period would be fairly good at around four percent,” Sen, who is also an agriculture economist, added. In the last three years, the average agriculture growth has stood at 4.2 percent and “we will achieve more than the set target of four percent by the end of the 11th Plan,” he noted.
Russia: Uralchem, one of the largest producers of nitrogen and phosphate fertilizers in Russia and the CIS, has announced that it will reduce the price of its mineral fertilizers by up to 25 percent for Russian agricultural producers as part of a program to support the Russian agricultural industry. “Reducing fertilizer prices by up to 25 percent is a part of the company’s unified strategy to increase the efficiency of Russian agriculture, stimulate demand from the domestic market and secure the development of Russian agriculture as a whole,” said Dmitry Konyaev, Uralchem commercial director.
Boston-Converted Organics Inc., which produces organic liquid and solid fertilizers and soil amendments from food wastes with a proprietary high temperature liquid composting process, has announced that The Home Depot will start carrying its products in stores in Massachusetts, New Hampshire, Connecticut, and New York with the spring 2009 season. Converted Organics President Edward Gildea applauded the decision, which he declared a “tremendous chance to expand the availability of high-quality organic fertilizer to consumers.” Gildea reported that a completed order is expected in January to enable organic products to be carried in 64 stores in the northeast, and that he expects the arrangement to grow into a long-term relationship. “The northeast is one of the most active organic markets in the United States,” said Gildea. “We are very excited about having our all-natural fertilizer product available to consumers through one of the most visible home improvement retailers in the world.”
Pasadena-Jacobs Engineering Group Inc. reports that it is performing engineering, procurement, and construction services for Flint Hills Resources’ new diesel desulfurization unit in Corpus Christi, Texas. The contract value was not disclosed. The estimate for the overall project, which includes the construction of the desulfurization unit, is estimated to be more than $250 million. The construction project is expected to take 18 months to complete.
Ince, UK-GrowHow UK reports that after an in-depth review of supply chain costs, it closed its wholesale operations in both Northern Ireland and the Republic of Ireland, effective Oct. 20, 2008. The move reflects increasingly challenging markets and the company’s increasing focus on efficient ammonium nitrate and granular NPK production at its Ince and Billingham facilities in Great Britain. “This move is regrettable,” said Richard Huxtable, GrowHow’s sales manager. “However, following the cessation of supply options from Denmark and Belgium it has been increasingly difficult to supply the needs of Irish markets efficiently – particularly as fertilizer markets become more volatile and logistics costs rise. We have timed our announcement to enable farmers and merchants to make alternative arrangements well ahead of the new season and thus to avoid unnecessary disruption to supplies in the spring.” GrowHow employs two business managers in Ireland, and discussion on their future roles is underway.
Geismar, La.-An Oct. 9 sulfuric acid leak at PCS Nitrogen’s Geismar, La., plant has already drawn a class action lawsuit from local residents. A PotashCorp statement said the leak from a storage tank occurred at approximately 9:45 a.m. “Within minutes, the site’s Emergency Response Team was on the scene and proceeded to mitigate the leak and prevent any offsite impact. All appropriate regulatory authorities were notified and no offsite impacts were identified. Per company procedures, an incident investigation was initiated to determine the root cause of the incident and to identify preventive measures,” the statement said. Since then, according to press reports, several Iberville Parish residents have filed a class action lawsuit, claiming that the acid leak endangered the health and safety of the general public. The lawsuit in 18th Judicial District Court maintains the sulfuric acid leak not only created an immediate health hazard, but caused plaintiffs “an ever-present fear ?Ǫ they will suffer from disabling or terminal diseases in the future.” The lawsuit also alleges the leak was the latest in a string of similar incidents at the plant which have endangered the public. PotashCorp said the company is aware of a class-action suit by some members of the area community, but declined comment because of company policy regarding pending litigation.
Maumee, Ohio-The Andersons Inc. said Oct. 28 that it expects full-year earnings per share to be less than previous guidance. The full-year 2008 guidance is expected to be within the range of $3.50-$4.00 per diluted share, down from the previous estimate of $5.00-$5.40 per diluted share announced in July. The company’s earnings per diluted share for 2007 were $3.75, which set a company record. The original guidance for the year, issued in May, was a range of $3.65-$4.00 per diluted share. Subsequent increases in guidance during the year resulted from realized and anticipated effects from sharp increases in global fertilizer prices. The decrease is primarily attributed to the recent sharp decline in global fertilizer prices, which has led to write-downs of certain fertilizer inventories. This will lead to significant margin decreases within the Plant Nutrient Group. In addition, despite falling prices, fourth-quarter volume for the group is expected to be weak. In spite of this change, the Plant Nutrient Group is expected to have a record performance in 2008.
CF Industries Holdings Inc. saw a drop in net income for the third quarter ending Sept. 30, 2008, to $47.1 million ($.82 per diluted share) versus the year-ago $86.5 million ($1.52 per share). CF cited $251 million in non-cash, pre-tax unrealized losses, or $2.88 per share on an after-tax basis, from mark-to-market adjustments on natural gas derivatives. During the year-ago quarter, the company reported $1.9 million ($.02 per share) in gains from gas derivatives.
Third-quarter net sales were up 75 percent, to $1.02 billion from the year-ago $582.9 million, due to substantial price increases for all products.
“CF Industries’ third quarter sales clearly reflect the strong pricing trends we’ve seen in global fertilizer markets for much of this year, with significantly higher prices for all our products,” said Steve Wilson, CF chairman and CEO. “This is typically a slow quarter for the North American fertilizer industry, as producers build inventory for the fall season. Despite that, our sales exceeded the billion-dollar mark for only the second time in the company’s history.”
Third-quarter gross margin was $120.9 million, versus the year-ago $151.3 million.
The nitrogen segment had a third-quarter gross margin in the loss column at $70.5 million on sales of $599.1 million, versus the year-ago positive margin of $80.2 million and $388.8 million, respectively.
CF estimates that it had about $11 million in pretax costs due to Hurricane Gustav, with $4 million of those being actual minor damage. The Donaldsonville complex, which went down Aug. 30 in preparation for the storm, had all units back in operation by Sept. 24. Electricity did not return to the area until Sept. 8. CF noted that logistics were also challenged by July flooding on the upper Mississippi River, followed by low water levels and the Gulf hurricanes. CF said its flexible distribution system was effective in restoring normal operations and product flow. Overall, nitrogen complexes operated at 84 percent of capacity during the quarter, with the higher postings at Medicine Hat, Alberta, offsetting Gustav-impacted Donaldsonville.
Nitrogen sales under the Forward Pricing Program totaled 960,200 st during the quarter, some 75 percent of segment sales volume. This compares to 53 percent for the year-ago quarter.
Third-quarter phosphate margins were $191.4 million on sales of $421.7 million, compared to the year-ago $71.1 million and $194.1 million. CF’s Plant City, Fla., phosphate complex operated at 99 percent of capacity during the third quarter.
Third-quarter phosphate sales under the FPP totaled 236,700 st, or 52 percent of segment sales volumes, down from the year-ago 45 percent and 72 percent in the second quarter 2008.
When announcing earnings Oct. 27, CF also said it has suspended activity with respect to the proposed gasification installation at Donaldsonville. It cited the high degree of uncertainty regarding several aspects of the project, including capital costs and future government policies on carbon dioxide emissions. As a result, CF said the project cannot be justified economically at this time.
CF said it continues discussions on the natural gas contract for its proposed nitrogen complex in Peru. CF said it and Technip, a leading engineering and project management firm, have made substantial progress on the project’s front-end engineering and design study, which they anticipate will be complete by year’s end.
CF also announced that during the third quarter it purchased a third dragline for use at its Hardee County, Fla., phosphate mine. When operational in 18 months, the line will significantly increase mine efficiency. In addition, it said the proposed uranium extraction project from its phosphate business is very much alive in concept.
As for the industry outlook, CF expects U.S. corn acreage will total more than 90 million acres next spring. The company also noted lower natural gas prices in its nitrogen business and lower ammonia and sulfur prices for phosphates.
Wilson told analysts that there was a lot of fear and loathing in the fertilizer markets right now. “We don’t think it is justified. For example, we don’t think farmers make their planting decisions for 2009 based on the October 2008 cash price for corn. This is typically the low point in the year for crop pricing. The December ’09 futures prices are a far better indicator, and that price provides the clear incentive to plant corn next spring. Yes, we are seeing price weakness for some fertilizer products, especially urea, and to a lesser extent UAN. It’s the off-season and even modest changes in supply can significantly affect prices at this time of year. After all, fertilizer is still a commodity.”
Wilson said even figuring corn at $4.43 per bushel and 153 bushels per acre, a farmer could still get a return after costs of $350 per acre.
Wilson said that once demand kicks in, prices here will need to reach levels that attract millions of tons of urea away from other markets. He also noted that Cornbelt prices of ammonia remain strong even though the fall application season is just beginning. He said there appears to be a lot of demand out there for ammonia if farmers can get it to the field.
As to whether the urea market has hit bottom, Wilson cited capacity shutdowns in Europe and Ukraine. “I don’t know whether this is the bottom. It’s beginning to feel like it is.”
Wilson said that CF has good forward order book for the fourth quarter, with about 1.5 million tons of nitrogen and phosphate contracted through year-end at attractive margins.
Wilson also noted that it has been moving potash through its distribution system with the help of its partner, Keytrade. Wilson said CF’s warehouse system has excess capacity, and it is looking to see if it can make a significant margin by moving product though the system this fall and next spring.
Nine-month results still remain ahead of last year. Nine-month net income was $494.5 million ($8.60 per share) on sales of $2.85 billion, up from the year-ago $237.3 million ($4.19 per share) and $1.9 billion. Nine-month gross margin was $862 million, up from the year-ago $434 million. Nine-month nitrogen gross margin was $489 million on sales of $1.89 billion, up from the year-ago $293.7 million and $1.4 billion, respectively. Nine-month phosphate gross margin was $373 million on sales of $963.6 million, versus the year-ago $140.3 million and $493 million, respectively.
3Q-08
3Q-07
YTD-08
YTD-07
Nitrogen
Tons sold (000)
1,282
1,346
4,666
5,012
Ammonia
111
116
717
916
Urea
547
618
2,001
2,003
UAN
615
605
1,912
2,049
Other nitrogen
9
7
36
44
Avg Selling Price $/st
Ammonia
571
370
513
375
Urea
596
334
456
319
UAN
339
230
314
207
Gas Cost
Donaldsonville
10.48
7.89
9.18
7.68
Medicine Hat
7.72
5.42
8.07
6.17
3Q-08
3Q-07
YTD-08
YTD-07
Phosphates
Tons sold (000)
457
497
1,383
1,468
DAP
404
394
1,167
1,188
MAP
53
103
216
280
Domestic
277
368
1,037
1,136
Export
180
129
346
332
Avg Selling Price $/st
DAP
943
388
715
334
MAP
771
403
600
345
Disclaimer of Warranty
All information has been obtained by Green Markets from sources believed to be reliable. However, because of the possibility of human or mechanical error by our sources, Green Markets or others, Green Markets does not guarantee the accuracy, adequacy, or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.
